What's the Future of Independent Record Stores in the Internet Economy?

Like many others, I came to Athens, GA for school, and I came from the suburbs, where you eat in chain restaurants like Applebee's, buy your clothes in chain stores like Banana Republic, and buy your music from a chain record store like Sam Goody. I knew before I arrived that there were places in Athens where I could see live music that I hadn't heard before, but I must admit I was surprised to find record stores that stocked an enormous quantity of music I didn't even know existed. Not just local stuff, either. The downtown Athens record stores are valuable resources for people who want to connect with new and interesting music.

In record stores like Wuxtry and School Kids, I discovered the pleasure of buying records for their cover art. Discovering a new band is a special pleasure, but discovering a great band because you were willing to take the chance that their music was as interesting as their cover art makes you feel like you have won the lotto. This is how I discovered Robbie Robertson and the Red Road Ensemble's Music for Native Americans, a fantastic record that turns out to be the soundtrack for a Turner Network Television special. This is also how I found Whiskeytown's Faithless Street.

The pleasure of finding gems like these is very much bound up in the process of shopping for music. I am not a shopping sort of person, but flipping through racks of music doesn't really seem like shopping. It is more like hunting for Easter Eggs than combing the aisles in search of new blender, not because you can use a lot more records than blenders, but because no matter how interesting the design or coloration of the blender might be, you will never be surprised by what it does to you.

Anyone who spends a significant amount of their year flipping through records in an actual record store soon learns about the hipster behind the counter. Although he is much maligned and mocked, this guy is very useful. He has the special advantage of a vocation that requires him to spend all day listening to records, and if he has any empathy at all, he soon develops the important skill of putting himself in another's shoes. Even if he doesn't like the same kinds of things you like (which he, of course, cannot, because then he wouldn't be hip enough to work at the record store), he can suggest records that are related, at least tangentially, to your anemic tastes.

The clerk and the browsing are the two biggest things missing from the online music experience, although buying music from the iTunes store, InSound, or CDBaby supplies more immediate pleasures than buying music from a record store. You don't have to leave your house, you don't have to buy a whole album, and your house doesn't quickly fill up with plastic. In exchange for these conveniences, you must accept the tiny, low resolution cover art, the intangibility of online music sales, and the grief caused by the music industry's futile and destructive digital rights management schemes. For me, at least, the process of buying music is less satisfying when I have to use a mouse.

What about those handy online recommendations? Sure, there are plenty of easily accessible opinion banks these days, but how do you know the recommendation wasn't written by a literate thirteen year old or someone your own age who has only heard thirteen bands? And what's the use of fifteen opinions about a record? Some of these recommendations systems are sophisticated. You can create an account and rate records and then the software will suggest things that others with similar ratings have "enjoyed," but creating an account and rating enough records for the software to be useful is an enormous time investment to get advice of questionable value.

This recommendation software is a kind of artificial intelligence that cannot make sympathetic judgments, cannot think laterally, and cannot see non-statistical relationships between two records. It can't tell you that the singer from the Decemberists sounds like the singer from Neutral Milk Hotel. It can only count ratings, analyze those ratings based on formulas created by programmers, and report the results. The hipster clerk in your local record store is an Earth-straddling Atlas compared to these programs.

Interestingly, Amazon's recommendation software returns Neutral Milk Hotel's In the Aeroplane Over the Sea as the sixth result in a search for "Decemberists," but it can't explain why it did that. That's why it is called artificial intelligence, because it only supplies a facsimile of thought.

All of this could be academic, though. In the normal way of technological artifacts, the Compact Disc, like the cassette, eight track, and LP before it, is not long for this world. There will be strife. Many will hold on to the old way with the desperate grip of vested interests. The music industry's inept, costly, and senseless decade-long assault on file-sharing continues unabated. So far, the net result of the conflagration has been massive online music sales controlled by a computer company instead of record labels, the ugly press associated with suing teenage girls, and a new file-sharing technology called BitTorrent that makes the old Napster look like a version of the United States Postal Service run by Edward Teach. The new technology is bound to prevail, as it always does.

Quoting commanding statistics to provide evidence for my argument might help, but the principle is sufficient. Faster and cheaper will displace slower and more pleasurable. That's what politicians mean when they use the word "economy."

So what future does a record store have in the digital age? How does a record store continue to earn its keep when its primary commodity can be delivered faster to its primary customers by a company half a world away? The answer is that the business model has to change.

Small record stores have never been the most efficient way to distribute music. They aren't able to compete with Wal-Mart style pricing, since they don't have the financial heft to make bulk deals with record companies or distribution houses. That's fine, though, because we were willing to trade a couple dollars per record for a selection larger than Wal-Mart's (where one can choose from manufactured candy, over-produced noise, and Brooks & Dunn). What we were really after was the value that small record stores add to the record buying experience, namely flipping through the racks and that ubiquitous hipster clerk.

While it is still too early to know what the new business model will be, it will have to incorporate those ongoing values of small record stores. Physical selection and decent advice about purchases serve customers in a way that online record stores never will. The number of used CDs available at record stores will only increase as their customer base digitizes their collections, but the profits made from reselling used CDs do not provide a secure future for record stores.

Watch out for record store formats where you can listen to a record, look at the cover art, then login to their wireless network and download the music from their online store, or an existing online store with which the physical record store has an affiliate relationship. Unfortunately for the small business owner, creating a large online music store where customers can download a large variety of music is an expensive and technically complicated process often beyond the ability and resources of an independent operation. The small size that is such a virtue when a customer needs to find local or independent music becomes a liability when trying to make the internet transition.

The larger online music stores, like the iTunes store and InSound, have affiliate programs that allow companies, websites, or people who refer customers to them to share in the profits of those sales. A model for referral income popularized by Amazon, these kinds of affiliate programs can enable local record stores to get a percentage of sales that their stores steer to the larger online music outlets. I am sure you have noticed the "Buy from Amazon" links on this site, Amazon graphical ads displaying books, movies, or game consoles, or simple exhortations to click through a link to Amazon and buy something. These exist because they offer sites an opportunity to generate revenue based on their recommendations. Local record stores could create a situation where customers can listen to a CD, get a recommendation from a clerk, and purchase that record or song in digital format on the spot.

Although the record store only receives in the neighborhood of ten percent of the sale (more or less depending on volume), they don't have to carry large inventories of particular records, they don't have to worry about shipments and sales taxes and storage, and they can let the large online music stores spend all the money required to keep up with technology. The important thing, however, is that a record store can concentrate on what it does best: being a resource about music for customers in their community.

This new record store will be more like a showroom than a retail outlet. It will be designed to have a large library of music that people can listen to and talk about, but delivery of the actual product will happen electronically either onsite, or offsite at the customers' convenience. A record store will be more like an interior designer that shows you samples of textures, fabrics, and colors from swatch books and catalogs, and receives a percentage of your orders from wholesalers as their compensation than a store where you actually bought furniture or carpet or light fixtures.

A local record store's website shouldn't try to imitate iTunes or InSound. They should seek to provide the same services they provide in their physical store, which are not limited to records available for purchase. Look for more record store websites to incorporate blogs where employees write short entries about the records they are playing in the store. Not only is it an instance where in-store recommendations can make an appearance online, but it reminds customers that the website is connected to real people living in a real place instead of real computers operating on a real corporate campus. Blogs, in-store news, and similar features also provide an ongoing reason for early adopters, people who already buy their music online and listen to it using digital devices, to use their local store, even if it is in its virtual incarnation.

Look for local music to be featured prominently on the websites of stores that enjoy a flourishing local music scene. The major online stores fail miserably at delivering music that you can see live this weekend in your town (or the musicians you can see live this weekend fail miserably at having their music for sale on the major sites). In Athens, for example, the downtown record stores are as vital a part of the local music scene as the musicians and the clubs. It is important for this aspect of local record stores to make the transition to the internet, not just to promote local music but to keep record stores connected to the geographical places and customer bases that support them.

Many industries have suffered at the hands of the internet revolution. Business owners have seen their customer base, and in some cases the need for their products, dry up as a result of the popularity of e-commerce. Industries that have made the transition have used creativity and taken chances to not only survive but expand the amount of business they do. Despite the dangers posed by online music sales and file-sharing, the future could be bright for enterprising record stores willing to take a few risks.